In last month’s blog, we discussed upcoming tax legislation in the international tax area. This month’s edition focuses on the same topic in the U.S. tax area. Below are what we see as the major legislative themes for 2015 in the U.S. tax area.
There are numerous provisions in both the House and Senate to repeal certain pieces of the health care mandate at this time. Most of these initiatives are being led by Senate Finance Committee Chairman Orrin Hatch. He and the Republican led Congress have made it publicly known that they intend to attack the health care bill piece by piece this year. Most of the current proposals involve separate bills to repeal the employer and individual health insurance mandate individually, since a bill fully repealing the mandate seems unlikely to pass. President Obama has also made it publicly know that he intends to veto such legislation, setting us up for a likely gridlock scenario in which many bills are proposed but none pass.
President Obama’s recent budget proposal included several new provisions, the most notable being a potential permanent extension of the Section 179 up front expensing allowance to $500,000 for 2015 with inflation indexing thereafter. Among the new provisions are also all of the usual proposals, including limiting the value of itemized deductions to 28%, the “Buffet Rule” (30% minimum tax rate on wealthy individuals), higher estate tax rates, and higher capital gains rates. Oddly enough, there is no talk of a 50% bonus depreciation extension to 2015 at this point, which is something that could change as we approach the end of the year.
Despite the massive impact that the 179 expensing allowance has on U.S. businesses, perhaps the most significant provision in the President’s proposals is a potential law change to tax deceased individuals on the unrealized gains in their assets when they pass. Current rules allow a step up in the basis of these assets when one passes, effectively allowing any unrealized gain on the assets to escape taxation. This provision seems unlikely to pass if any public momentum builds up against it.
In summary, the fate of the health care mandate is uncertain, but we will likely see some form of tax reform on both U.S. and international tax this year. For all the talk we see in the public press about simplifying the tax code, 2015 looks to be quite the opposite: another year of further complication with respect to tax issues. As we approach year end, we will continue to keep others informed of major tax acts. In the meantime, for any updates on information contained in our last two editions, please contact Ryan Giolitto at 630-285-0215 x8214.